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Rule Invalidating Arbitration Agreements in Nursing Home Neglect Cases Held to be Preliminarily Unenforceable

The Centers for Medicare and Medicaid Services (“CMS”) recently enacted a new federal regulation [42 C.F.R. Section 483.70(n)(1)] that invalidates arbitration agreements signed at the time of a person’s admission to any nursing home that accepts reimbursement from either Medicare or Medicaid.  This covers essentially every nursing home in the country.

Through an arbitration agreement, a nursing home resident waives his or her constitutional right to a trial by jury in the event the nursing home is negligent and causes injury or death. Instead, through arbitration, one to three attorneys, acting as arbitrators, would decide whether nursing home neglect occurred and, if so, the amount to be awarded to compensate the injured person for medical expenses, funeral expenses (if death resulted from the neglect), and emotional losses.

Arbitration agreements have long been the bane of attorneys that handle nursing home injury and wrongful death cases because, generally speaking, arbitrators tend to be more conservative than juries.  Arbitrators deal with tragic claims routinely.  The thought is that, in doing so, they can become desensitized to neglect and the resulting injuries or death.  Jurors on the other hand, having not been exposed to such tragedies on a regular basis, may be shocked by neglect and have more sympathy with respect to the injury or wrongful death that resulted.

Arbitration agreements, which are usually presented by a nursing home employee along with a host of other paperwork at the time of admission, are controversial to begin with.  Many residents have some degree of dementia and their ability to fully understand the rights they are signing away can be questionable.  Further, with many admissions documents being signed at once, it is common that relatively little explanation is given to the new resident about the effect of the arbitration agreement.

Our law firm challenges the enforceability of arbitration agreements on numerous bases including: whether the resident had the mental capacity to understand the nature of the rights being waived; whether a family member that signed the agreement had the authority to sign on the resident’s behalf, which is usually conveyed by a pre-existing power of attorney; and whether the agreement is unambiguous in the language used to explain what is being waived.  Despite these challenges, it is common that there is no “out,” and the case proceeds to arbitration.

Acknowledging the unfairness of arbitration agreements, CMS enacted the new rule which was to take effect with respect to any arbitration agreements signed after November 27, 2016.

The legality of the new rule has already been challenged by the nursing home industry. Unfortunately, the Court hearing the case – the United States District Court for the Northern District of Mississippi – has made a preliminary finding that there is a “substantial likelihood” that CMS did not present sufficient justification for banning arbitration agreements in nursing home neglect cases. The necessary support, according to the Court, required objective proof that arbitration actually caused the harmful effects CMS relied on in making the rule.

Furthermore, the Court held that CMS overstepped its authority in enacting the rule.  Simply put, an agency, as part of the executive branch of government, cannot create legislation.  Instead, rules created by an agency are supposed to help implement the laws as enacted by Congress.  Citing the fact that Congress has considered, but not passed, bans on arbitration agreements for nursing home abuse or neglect claims, the Court found that CMS lacked the authority to ban arbitration agreements even though it is charged with the task of: “protecting and promoting the rights of each resident;” establishing “other rights” for residents; and promoting the “health, safety and welfare” of residents.

The Court’s ruling is only preliminary; however, the obstacles presented by its preliminary injunction Order present a very burdensome task.  Should the rule ultimately be ruled invalid on the basis that CMS overstepped its authority and effectively enacted legislation, it is unlikely that Congress will ban nursing home arbitration agreements any time in the near future, given the current Republican majority.

We will continue to monitor and report on developments regarding this issue.

If you or a loved one signed an arbitration agreement and have suffered from nursing home neglect or abuse that caused personal injury or wrongful death, please contact our nursing home neglect attorneys located in Jacksonville Florida.